Citigroup reiterates 'Buy' rating on IGL

Citigroup reiterate 'Buy' rating on Indraprastha Gas ( IGL) and set a price target of Rs 426.

The current estimates are conservatively based on EBITDA/scm of Rs 4.6/4.5 over FY13/14E and CNG prices of Rs 35.5/37.0 per kg, which should help the company deliver a two-year EPS CAGR of 15%.

Citi believe the recent stock underperformance, on the back of the government's move to refer the marketing margins earned by gas marketers to the PNGRB, could partly reverse following the price hike, as margin visibility, a key driver of stock performance, has materially improved, at least in the near term.

Regulating the distribution margins of city gas companies will be tantamount to determining the end price of gas, something which is out of the purview of the PNGRB.

IGL, along with GSPL, remain among our preferred picks in the gas sector.